California Businesses Must Watch Out for “Disparate Impact” Discrimination

State and federal employment statutes prohibit discrimination by California businesses on the basis of multiple factors, including race, sex, religion, and others. The scope of these laws extends beyond overt, deliberate discrimination. An employment practice that adversely impacts one or more protected groups—known as “disparate impact”—may also constitute unlawful discrimination, even if the employer has no discriminatory intent. Questions of this nature should be directed to a dedicated California employment discrimination attorney to ensure you understand all options available to you.

A recent news story offers an example of how a disparate impact claim could have emerged. An internet-based retail company recently abandoned an artificial intelligence (AI) system that it had developed to screen job applicants, after it discovered that the system was apparently favoring male over female applicants in ways that were unrelated to job qualifications. The company has stated that it never used the system for real-world recruiting or hiring decisions.

The U.S. Supreme Court first recognized a Title VII claim for disparate impact in Griggs v. Duke Power Co., 401 U.S. 424 (1971). The employer in that case conditioned job offers and promotions on “a high school education or passing of a standardized general intelligence test.” Id. at 426-27. While there was no evidence of discriminatory intent, this policy had the effect of excluding African-Americans from employment opportunities. The court found that the policy was not reasonably related to qualifications for the jobs in question. It unanimously held that Title VII requires “the removal of artificial, arbitrary, and unnecessary barriers to employment” when they cause disparate impact based on a protected category. Id. at 431.

A 5-4 decision by the court, Ricci v. DeStefano, 557 U.S. 557 (2009), may complicate the rule established by Griggs. The employer, concerned about incurring liability under Title VII, had discarded the results of a test that it used to award promotions after it found “that white candidates had outperformed minority candidates.” Ricci, 129 S.Ct. at 2664. The court held that this was impermissible disparate impact discrimination against white and Hispanic candidates, because the employer could not “demonstrate a strong basis in evidence that” it would have been liable under Title VII without the disputed action. Id.

The AI system described above reportedly never made it past the experimental stage. It used a system of “machine learning” that partly involved reviewing resumes of successful job applicants over a ten-year period. This apparently led the AI to interpret past disparities in hiring as reflecting preferable attributes. Since the company, like most technology companies, has historically hired more men than women, the AI’s results tended to favor male applicants. Rather than try to adjust the AI, the company decided to abandon the experiment.

For more than forty years, employment attorney James G. Schwartz has represented Bay Area businesses and business owners in both litigation and transactional matters. Please contact us online or at (925) 463-1073 today to schedule a free and confidential consultation with a member of our knowledgeable and experienced team.